Britain's Debt Will Keep Rates Low

The UK has seen much less improvement in its deficit than its biggest economic peers. In fact, national debt is £100 billion larger than it was a year ago

M&G Investments 4 November, 2014 | 7:36AM

Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Jim Leaviss of M&G Investments discusses redeeming war loans as UK borrowing rises.

Bonds and war go together hand in hand, and for most of history rising government debt levels have been directly caused by the cost of financing conflicts, or the reparations afterwards. The several outstanding War Loans also tell the story of the UK’s extreme fiscal distress in the 1930s, and the quasi default that lead to a patriotic reduction in the coupon of the 5% loan down to 3.5%, and of the inflations of the Seventies and Eighties which saw the value of these undated, long duration bonds collapse to levels where their yields were higher than their prices. 

On Friday HM Treasury announced that £218 million of one of the smaller, and higher couponed, War Loans will be repaid at par (100). This bond was issued in 1927 to refinance some WW1 debt. There’s obvious speculation that the rest of the War Loans, including the £2 billion 3.5% issue, might also be redeemed if yields stay low.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

M&G Investments  is a leading retail and institutional fund manager.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement